Forge receivers retrench 1,300 workers from its workforce in Australia and New Zealand

The receivers of the Perth-based Forge Group say 1,300 workers have lost their jobs as part of a restructure.

The mining services contractor went into administration yesterday after its financial backers withdrew support - the ABC understands the company owes around half a billion dollars to creditors.

Forge employs more than 1,750 people in Australia and New Zealand, mainly in construction, and about 400 employees are being retained at this stage to complete the Diamantina power station project in Queensland and the South Hedland power station in WA.

It was hoped some of the employees may be able to get work with the new contractors.

The company's international operations are being treated separately in the restructuring process.

KordaMentha said Forge's international businesses in South Africa, Asia and the US would operate as usual pending a sale, but the Australian operations had to be assessed on a project-by-project basis.

ANZ has told the ABC that it worked hard in recent months to support Forge and assist its management.

The bank had provided Forge with $11 million in the past fortnight to cover wage bills, but it was not enough to keep the company afloat.

It said the decision to appoint an administrator was disappointing for everyone involved.

Last month, Forge appointed Euroz Securities to deal with approaches from third parties.

Some groups which were reported to be interested ruled it out when contacted by the ABC.

The firm had warned it expected to post a loss of up to $25 million for this financial year.

More failures to come

Morningstar equity analyst Ross MacMillan says, after the mining boom, the mining services sector needs to go through a period of rationalisation.

"Many companies have done very well over that period but now we're entering a significant downturn and I think we'll see financial distress, I think we'll see many mining service companies and contractors suffer from financial problems," he predicted.

"A lot of them haven't reduced their debt and now they're faced with falling earnings. Conditions out there can be considered to be very difficult and very challenging and I think we'll see a number of problems continue over the next two to three years."

Mr McMillan says the major mining companies are putting a lot of pressure on engineering and construction firms to keep costs down.

"There'll be a lot of pressure by their customers for them to reduce the bids that they're putting in on tenders for new work and basically we're going to see their earnings fall pretty substantially over the next two to three years," he concluded.